The size of a commercial property is a critical factor in assessing its revenue potential. Alongside location and property type, the property’s dimensions significantly influence the rents it can generate.
When projecting rental income, it’s essential to consider the Gross Leasable Area (GLA), which represents the total usable space within a building that can be leased.
What is Gross Leasable Area?
Gross Leasable Area (GLA) refers to the total floor area available for lease within a property. It encompasses both exclusive tenant spaces, such as offices and storage areas, as well as shared spaces like lobbies and entryways, but typically excludes utility or maintenance areas.
GLA helps quantify the leasable portions of a building, making it a key metric for property valuation and rental income projections.
Importance of Gross Leasable Area
Understanding GLA is crucial for both investors and tenants:
- Simplified Revenue Projections: GLA allows for straightforward calculations of Gross Potential Rent (GPR) without the need to account for lost space due to walls or common areas.
- Industry Standard: Most commercial leases and ROI analyses are based on GLA, making it a widely accepted metric in the industry.
Calculating Gross Leasable Area
GLA is determined by measuring all usable spaces within the interior side of a building’s exterior walls, following guidelines set by the Building Owners and Managers Association (BOMA). The calculation generally includes:
- Tenant-exclusive areas such as offices and storage.
- Common areas like lobbies and hallways.
Formula:
GLA = Total Square Footage – Space Unusable by Tenants
Gross Leasable Area vs. Other Metrics
- Rentable Area: Similar to GLA but often excludes vertical partitions like walls and columns.
- Net Leasable Area (NLA): Focuses on tenant-exclusive spaces, excluding shared areas and structural components.
Using GLA for GPR Calculations
Gross Potential Rent (GPR) can be estimated using GLA and the price per square foot:
GPR = GLA x $/sq. ft.
For example, a building with 9,500 square feet of leasable space and a rate of $8 per square foot yields a GPR of $76,000.
Conclusion
Gross Leasable Area is a fundamental metric for evaluating commercial properties. By understanding and utilizing GLA, investors can better estimate rental potential and ensure they make informed decisions in their real estate ventures.